Government Suspends MBI Contract After Rival Complains

By Nell HendersonJuly 22, 1986

The federal government yesterday told MBI Business Centers Inc., the Rockville retailer of personal computers, that the company could not accept new orders from government agencies for at least three weeks.

The General Services Administration's board of contract appeals temporarily suspended GSA's contract with three MBI stores at the request of Businessland Inc. of San Jose, Calif., which alleges that the contract should not have been extended without competitive bidding.

MBI's original contract to operate the stores expired June 27. GSA granted MBI a six-month extension, with the option of six additional one-month extensions, saying it wanted to avoid a gap in service while the GSA held an open competition for a replacement contract.

The suspension will be in effect until the board decides whether the contract extension should have been open to bids. The board said it expects to decide the issue by mid-August.

MBI, which owns and operates 32 computer centers on the East Coast, said the temporary suspension was expected and will not affect the company significantly. The three stores will remain open to fill and support orders placed before yesterday's ruling, and will keep the approximately 80 employes on at full pay, said Robert J. Guerra, MBI senior vice president for government relations.

The three stores, called Office Technology Plus (OTP), sell microcomputers and provide maintenance, repair and other support services to government agencies in Washington, Atlanta and Philadelphia. The six-month contract was worth about $18 million, and each of the six additional one-month optional extensions was worth about $1.5 million, GSA said. More than 70 agencies were eligible to use the stores.

The stores accounted for 11 1/2 percent of MBI's total sales in the first quarter of this fiscal year, down from 23 percent in the fiscal year that ended Jan. 31, 1986, and 35 percent in the year that ended Jan. 31, 1985.

The three-month suspension "is not a big surprise . . . the impact is not going to be significant at all," Guerra said.

A more serious matter, he said, would be if the appeals board maintains the suspension until a competitive-bid process is completed.

Businessland protested the extension, arguing that the business should have been open to competitive bids.

"We're just trying to open up the bidding so everyone has a chance and the government gets the best price," said Brooks McChesney, Businessland's vice president and general counsel.

Businessland is asking the appeals board to close the OTP stores until the new contract is awarded on a competitive basis, or to award an interim contract on a competitive basis, he said.

MBI, formerly known as Math Box Inc., and Businessland announced merger plans in April, but abandoned them in late May. Both companies said the OTP dispute is unrelated to their prior merger discussions.

GSA had no comment on the suspension, but said it would not be possible to hold a competition for the interim contract before the new contract is awarded, which should be in the fall.

GSA originally had intended to request proposals for the new contract last October, and to award it on a competitive basis by the time MBI's contract had expired. But the competition was delayed at that time, pending the review of a General Accounting Office report criticizing the OTP operation. GSA argued that it granted MBI the extension after the delay made it impossible to award a new contract in time to avoid a gap in service.